A neuronal cell line (CBSV) can be induced to differentiate morphologically and biochemically under defined conditions. The inverse relationship between expression of differentiated functions and production of SV 40 antigen suggested that transformation and differentiation may be related. Extension of these studies indicated that the adenylate cyclase system could be involved in these processes. The adenylate cyclase responsiveness to non-hormone activators is greatly decreased following transformation of a variety of cell lines with DNA and RNA tumor viruses, although the components of the adenylate cyclase system seem identical. Studies with one particular system indicates that this defect correlates with the expression of viral protein kinase activity. On the other hand a differentiated, non-transformed thyroid cell strain requires cAMP for maintenance of normal thyroid function and morphology. Taken together, the data suggests that there may be some interplay between viral gene expression and cAMP related processes involved in the regulation of differentiation and transformation.